Vince Cable, the Lib Dem Treasury spokesman said the cuts would have to be even bigger than the £10 billion a year in the manifesto.

He said: "There is more to be done. I fully appreciate this isn't enough. We have to go beyond that."

The Lib Dems would also raise the starting threshold for income tax to £10,000, a tax cut for 3.6 million low earners.

That would cost £17 billion, money the party said it would find by cracking down on tax avoidance and by imposing higher taxes on airline flights.

The party also pledges to boost the pay of the lowest ranking members of the Armed Forces to bring them into line with the starting salary of their emergency services counterparts.

Under the manifesto commitments, prison inmates would be forced to work and contribute to a compensation fund for victims.

In his foreword to the document, party leader Nick Clegg said the Lib Dems will ''sort out our rotten political system once and for all'' if successful at the May 6 General Election.

With opinion polls suggesting the possibility of a hung Parliament, Mr Clegg claimed a vote for the Lib Dems could spell the end of the political ''stitch-up'' between Labour and the Tories which has lasted since the Second World War.

The policy programme, launched in the City of London, is built around ''four steps to a fairer Britain''.

These are:

:: Fair taxes, including the promise to raise the inheritance tax threshold to £10,000

:: Economic reform, including breaking up the giant banks, separating their investment and High Street operations, investment in infrastructure and ''honesty'' about the ''tough choices'' to cut the deficit;

:: Constitutional change, including the power to sack corrupt MPs, reform of the voting system, an elected House of Lords and a Freedom Bill to restore civil liberties.

Mr Clegg said: ''Only Liberal Democrats have the big ideas for fundamental, structural changes in the way our country works to make it fair.

''Only Liberal Democrats will shake up the tax system to put £700 back in the pockets of tens of millions of low and middle-income families, paid for by ensuring the wealthy pay their fair share.

''Only Liberal Democrats will break up the banks and start Britain building things again, creating a sustainable economy that no longer threatens our planet's future.

''Only Liberal Democrats will invest in our schools to give every child, no matter their background, a fair start in life.

''And only Liberal Democrats will sort out our rotten political system once and for all.''

A ''strong vote'' for the Lib Dems ''means the end of the stitch-up between the two old parties''.

He wrote: ''Elections that can really make a difference don't come along very often. But this is one of them.

''This May, you have an opportunity to shape the future of our country for the better.

''We've had 65 years of Labour and the Conservatives, the same parties taking turns and making the same mistakes, letting you down.

''They have taught people to expect little from politics, and get less.

''It is time for something different. It is time for something better.''